Why your accountant cannot get your cost of goods sold right at your independent pharmacy

Cost of goods is one of, if not the most important, pieces of data to get right on your community pharmacy financials. Yet everyday we hear and see financials with inaccurate cost of goods sold.

What causes this? It seems simple, shouldn’t an accountant be able to calculate how much I spend on drugs? Unfortunately, unless you understand the pharmacy business there is no way as a bookkeeper or accountant you could provide accurate cost of goods. There are several reasons:

  1. Pharmacy System – accountants assume that the pharmacy system is collecting accurate drug costs. As you may know these systems are not designed to collect accurate cost data. Many of the systems do not collect drug costs from multiple vendors, cannot account for DIR fees or rebates, or use inappropriate costing models.
  2. Rebates – so many accountants do not understand rebates received from wholesalers and do not account for them or account for them incorrectly.
  3. Revenue Recognition – most accountants are unaware of GER fees and DIR fees, especially those not taken at the point of sale. As such they overstate your revenue which in turn overstates your cost of goods sold.

At IRx Consulting we are Accounting experts and offer a comprehensive Pharmacy Accounting and Management service with a suite of complimentary services including Data Dashboards, Payroll & Human Resources and Pharmacy Management consulting.



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